Has the interaction between skewness and kurtosis of asset returns information content for risk forecasting?

Inés Jiménez, Andrés Mora-Valencia and Javier Perote

Finance Research Letters, 2022, vol. 49, issue C

Abstract: This paper introduces the effect of the crossed products of Hermite polynomials on Gram-Charlier densities. This allows capturing the impact of the interaction between skewness and kurtosis and evaluating this new parameter as an additional source of information for risk management. We show that our modified Gram-Charlier density presents an improved accuracy, especially at distribution tails. Risk quantification is assessed for S&P500 losses with backtesting procedures for Value-at-Risk and Median Shortfall.

Keywords: Gram-charlier expansions; Skewness; Kurtosis; Value-at-risk; Median shortfall; Backtesting (search for similar items in EconPapers)
JEL-codes: C12 C53 C58 G17 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003294

DOI: 10.1016/j.frl.2022.103105

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